Customer centricity is a key success factor in retail banking today. Yet, I have seen all too often that when bankers speak about customer-centricity, perception falls short of reality. Most times they are really referring to a desire to become customer-centric or believing they have already achieved a customer-centric organization, while C-level executives relate to the word on a strategic level only.
What many of us are wondering is what we need to change in the customer banking experience or in the pricing process when we adopt a customer-centric strategy. How would customers be targeted, priced or serviced differently? With the stakes so high, many banks are trying to find a pragmatic way to create a meaningful customer journey and a customer focused organization.
The holistic approach to customer centricity
Customers no longer want to receive a fragmented banking experience. They want consistency across all products, services, channels and offers they receive. For example, customers want to be able to get price quotes on multiple channels including online, call centers or their local branch, without having to restart the pricing request process if they change channels midway.
Pricing is also an important lever in the customer journey because of the impact it has on customer behavior and profitability. The challenge is finding the ideal price point that our customers are willing to pay, considering the value they derive from our products and services. This requires banks to become customer-centric on a strategic, tactical and operational levels and change the way we set prices. We need to really get to know our customers at a granular level; the more customer insights we have, the more segmentation choices we will have at our disposal and the more we are able to create different products and pricing structures that match customer expectations.
The strategic honeycomb framework
The Honeycomb framework is a helpful mechanism to form the building blocks for a profitable pricing structure and a sustainable business model, where regulatory and digital changes will challenge or even commoditize the traditional banking service.
The framework also provides a way to gain more customer insights from the strategic to the tactical levels. Customer insights derived from the customer life stages, financial know-how, available time of customers to interact with the bank, the number of other products held with the bank and the LTV potential. These insights are useful in the design of customer-centric products and services.
On an implementation level, the framework strives to align actions taken at each of the three levels (strategic, tactical and operational) towards the customer, adding an all-important feedback loop, which serves to continuously improve the value creation and delivery. Besides delivering input to the feedback loop, “customer insights” merge hard and soft data to create an interconnection between customers’ needs, preferences, behavior, and perceptions, where the latter is an important source to capture customer value.
Figure 1: The strategic honeycomb – a framework for customer orientation
Achieving true customer-centricity
Customer-centricity is not a destination but a journey and therefore it is performed together with the customers, continually bringing their opinions to the forefront through the feedback loop. First and foremost, this means that bankers need to start celebrating failure and making it common practice to report failure or shortcomings; if not then we lose out on getting the needed fuel to run our improvement engines.
Once we have the feedback loop established, we can continuously adjust our value creation and delivery to match the perceived value of our customers. When done right, we will build “better” relationships with our customers and a create source of lasting competitive advantage.
I personally invite you to join me at the Earnix Pricing and Innovation Summit in London on 2-3 November. In my session, I will discuss in depth the Strategic Honeycomb Framework and all its elements, as well as present practical use cases using this framework. You are welcome to register here.